Do you really know who your business is competing with? As Small business owners, we often get this very wrong. There are in fact 4 main business competitors every small business has and it is vital you know who they are.
Who are your real Business Competitors?
- A direct competitor
- A substitute
This one is fairly straight forward and where we often give much of our attention. If they don’t choose you then your client can elect to buy from a direct competitor which is another business very much like yours that sells the same product or service.
This is where your client solves their problem (i.e. the problem that your business solves) with a substitute instead of a direct competitor. This can be a major blind spot for business owners, the inability to recognise a substitute as a threat to their business. Take coffee as an example, a direct competitor to a good barista is the other good barista across the street but a substitute would be Red Bull from the convenience store nearby. You need to understand what the substitute competitors are for your client.
Your client (in many cases) can ‘do it themselves’. Maybe not as well as you can do it for them but they can still get a result, electing to not buy from you but instead solve the problem on their own. This will be a big threat to accountants in the coming years as the ATO makes it easy for people to lodge their own tax returns as an example. People can build their own websites, do their own marketing, train themselves at the gym or buy a book or Google the solution.
The last one is apathy where your client just does nothing at all, put it off temporary or indefinitely. For some of the products and services out there, the client doesn’t need to engage even if there is good reason to do so.
Why is it important to know exactly who your business competitors really are?
It is important because you need to know who your real competition is so you can design your marketing and sales spiel to suit.
So who is your competition?
Out of the last 10 or 20 clients that you missed out on, work out what percentage of those clients you lost to each of the four areas of competition. Then review how you market and sell. You may need to ask yourself are you addressing the right competitor or do you need to change your approach?